Community Heritage Financial, Inc. Reports Earnings for the Second Quarter of 2022

Rhea-AI Summary

Community Heritage Financial, Inc. (CMHF) reported a strong performance for the six months ended June 30, 2022, with net income of $3.89 million, a 55.6% increase from $2.50 million in the prior year. The second quarter net income was $2.07 million, an increase from $1.82 million in Q1 2022. Total assets grew to $872.6 million, bolstered by $20.6 million in deposits. Loan balances reached $692.8 million, increasing by $48.9 million since March 31, 2022. However, non-interest income decreased by 24.7% year-over-year, and operating expenses rose by 4.6% compared to Q1 2022.

Positive

• Net income increased by 55.6% to $3.89 million for the first half of 2022.
• Second quarter net income rose to $2.07 million, up from $1.82 million in Q1 2022.
• Total assets reached $872.6 million, up $27.0 million in Q2 2022.
• Deposits grew by $20.6 million in Q2 2022 and $54.1 million year-to-date.
• Loan balances increased by $48.9 million to $692.8 million since March 31, 2022.
• Net interest income for Q2 2022 was $6.93 million, showing growth from previous quarters.

Negative

• Non-interest income decreased by 24.7% compared to Q2 2021.
• Operating expenses increased by approximately 4.6% from Q1 2022.

MIDDLETOWN, Md., July 20, 2022 /PRNewswire/ -- Community Heritage Financial, Inc. ("the Company") (OTC PK: CMHF), the parent company of Middletown Valley Bank ("MVB" or the "Bank"), announced today that for the six months ended June 30, 2022 the Company earned net income of $3.89 million or $1.73 per share, an increase of $1.39 million or 55.6% compared to net income of $2.50 million or $1.11 per share for the six months ended June 30, 2021. Second quarter 2022 net income was $2.07 million or $0.92 per share, an increase of $250 thousand compared to first quarter 2022 net income of $1.82 million and an increase of $1.18 million compared to $892 thousand for the second quarter of 2021.

The Company continued its controlled growth strategy during the second quarter which resulted in an ending balance sheet of $872.6 million in total assets as of June 30, 2022, up $27.0 million for the second quarter and up $54.7 million from December 31, 2021. Deposit growth of $20.6 million for the second quarter of 2022 and $54.1 million on a year-to-date basis has funded the overall growth in the balance sheet. The deposit growth includes $10 million in brokered deposits, which were added late in the second quarter of 2022. The deposit growth, as noted, has also funded robust loan growth over the same period. Loan balances were $692.8 million as of June 30, 2022, up $48.9 million from March 31, 2022 balances and up $82.3 million for the year. As of June 30, 2022, all loan balances under the Paycheck Protection Program ($13.3 million outstanding at December 31, 2021 and $3.6 million outstanding as of March 31, 2022) have been forgiven and remaining balances paid to zero. Excluding the PPP balances as noted above, core loan growth for the second quarter of 2022 was $52.5 million and $95.6 million year-to-date for 2022. The strong loan growth has increased the earning asset base resulting in net interest income of $6.93 million for the second quarter of 2022, up $518 thousand compared to $6.41 million for the first quarter of 2022 and up $984 thousand compared to the second quarter of 2021. To support the loan growth as noted above, the Bank added $217 thousand to the loan loss provision for the quarter, up from $10 thousand in the first quarter of 2022. The additional provision brings the allowance for loan losses to total loans ratio to a level of 1.03% as of June 30, 2022, up slightly from 1.01% as of March 31, 2022. Operating expenses increased by approximately 4.6% during the second quarter compared to the first quarter of 2022 as the Company continues to invest in employee assets, training and technology in support of the balance sheet growth. In summary, strong earning asset growth, controlled funding costs and controlled operating expenses led to overall net income for the first six months of 2022 of $3.89 million, which represents the highest first half earnings in the history of the Company.

Subsequent Events:

As of December 31, 2021, the Bank converted from the Community Bank Leverage Ratio (CBLR) for regulatory capital reporting to the Basel III Risk Weighted Capital guidelines. Upon further evaluation, management has determined that a portion of the first lien residential mortgage portfolio, which had been risk weighted at 100% for the December 31, 2021, and March 31, 2022, reporting periods, were eligible for 50% weighting under Basel III guidelines. The adjustment will have a favorable impact on the Risk Based Capital position at the Bank. Amended Call Reports will be filed for December 31, 2021, and March 31, 2022, to update the capital schedules. All current financial reports as of June 30, 2022, and future financial reports reflecting historical data will reflect the change.

Quarterly Highlights – 2Q22 vs 1Q22

• Tangible book value per share increased by $0.73 or 3.3% to $22.67 per share at June 30, 2022, from $21.94 at March 31, 2022. The tangible book value increase was due to earnings of $2.07 million along with minimal adjustments to accumulated other comprehensive income (loss) for the second quarter.
• Cash balances decreased on a linked-quarter basis by 55.4% or $19.2 million. The decrease in cash balances was due to the strong loan growth in the second quarter totaling $48.9 million.
• Gross loans increased by $48.9 million or 7.6% at June 30, 2022 compared to March 31, 2022. PPP loan forgiveness was completed during the second quarter and generated interest and fee income of $96 thousand during the second quarter of 2022 compared to $320 thousand for the first quarter of 2022.
• Overall deposits grew $20.6 million, or 2.7%, during the second quarter of 2022. Non-interest-bearing deposits grew $7.1 million and interest-bearing deposits grew $13.5 million. While short-term interest rates in the market increased dramatically during the second quarter, the Bank's cost of interest-bearing deposits for the second quarter increased by only 3 basis points to 0.31% compared to the first quarter of 2022 at 0.28%. The increase was due mainly to an increase in rate on a small portion of the money market accounts, which are indexed to short-term treasury rates.
• Strong loan growth and controlled funding costs led to an increase in the Bank's net interest margin of 10 basis points to 3.45% in the second quarter of 2022 from 3.35% in the first quarter of 2022.
• The allowance for loan losses to total loans ratio was 1.03% at June 30, 2022, an increase of 2 basis points from 1.01% at March 31, 2022. The increase in the allowance for loan losses to total loans coincides with the additional provision for loan losses of $217 thousand in the second quarter compared to $10 thousand for the first quarter of 2022.

Quarterly Highlights – 2Q22 vs 2Q21

• Tangible book value per share of $22.67 at June 30, 2022 decreased by $0.82 or 3.5% from $23.49 at June 30, 2021. The tangible book value decrease was due to an increase in the accumulated other comprehensive loss of $8.95 million at June 30, 2022, from a gain of $54 thousand at June 30, 2021.
• Net loans of $685.7 million as of June 30, 2022 were up $121.6 million or 21.6% compared to June 30, 2021, which includes PPP loan forgiveness of $31.6 million during the time period. Excluding PPP loans, core loan growth on a year-over-year basis was $153.2 million or 28.7%.
• Deposits grew $139.9 million or 21.5% during the 12 months ended June 30, 2022. The majority of the growth was in demand deposits ($60.9 million), low-cost money market deposits ($49.7 million), and savings deposits ($12.4 million). 
• For the three months ended June 30, 2022, the Bank's overall cost of funds increased to 0.20% from 0.19% for the three months ended June 30, 2021. This increase resulted from increased money market rates, additional borrowings and brokered deposit purchases during the second quarter of 2022.
• The loan loss provision for the quarter ended June 30, 2022 was $217 thousand compared to $1.43 million for the quarter ended June 30, 2021. The second quarter of 2021 included increased provision expense associated with an isolated Covid related charge-off.
• Non-interest income for the quarter ended June 30, 2022 decreased by $430 thousand or 24.7% compared to the quarter ended June 30, 2021. The mortgage activity and secondary sales income decrease of $436 thousand accounted for the majority of the decrease.
• Non-interest expense during the quarter ended June 30, 2022 increased by $326 thousand compared to the quarter ended June 30, 2021. The increase was directly related to the growth of the balance sheet (19%) as staffing has increased to support such growth. Salary and benefits expense during the second quarter of 2022 increased 6.5%. Operating expenses in the second quarter of 2022 also included increased occupancy and equipment expense related to the opening of a new branch in Franklin County, PA in May 2021 to expand our market area.

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on July 15, 2022, for stockholders of record as of July 29, 2022, and payable on August 5, 2022.

Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-3055

Community  Heritage Financial, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
			June, 30		March, 31		December 31,		September 30,		June 30,
			2022		2021		2021		2021		2021
			(Unaudited)		(Unaudited)		(Audited)		(Unaudited)		(Unaudited)
Assets
Cash and due from banks		$	15,495	$	34,704	$	41,255	$	55,559	$	49,830
	Total cash and cash equivalents		15,495		34,704		41,255		55,559		49,830
Securities available-for-sale, at fair value			36,923		143,435		144,019		130,431		86,343
Securities held to maturity			105,693		-		-		-		-
	Total securities		142,616		143,435		144,019		130,431		86,343
Equity securities, at cost			594		406		338		338		338
Loans			692,811		643,878		610,502		570,727		569,877
Less allowance for loan loss			7,098		6,493		6,500		6,072		5,812
	Loans, net		685,713		637,385		604,002		564,655		564,065
Loans held for sale			2,730		4,044		5,423		7,963		8,008
Premises and equipment, net			6,529		6,674		6,771		6,858		7,025
Right-of-use assets			2,085		2,191		2,301		2,417		2,533
Accrued interest receivable			2,264		2,067		1,971		1,738		1,746
Deferred tax assets			4,917		4,916		2,141		2,007		1,873
Bank-owned life insurance			6,476		6,484		6,475		6,443		6,393
Goodwill			1,657		1,657		1,657		1,657		1,657
Intangible assets			-		-		1		3		5
Other Assets			1,487		1,598		1,556		1,714		1,588
	Total Assets	$	872,563	$	845,561	$	817,910	$	781,783	$	731,404
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest-bearing demand		$	294,685	$	287,579	$	272,400	$	254,057	$	233,757
Interest-bearing			496,127		482,651		464,285		444,489		417,157
	Total Deposits		790,812		770,230		736,685		698,546		650,914
Federal home loan bank advances			5,000		-		-		-		-
Subordinated debt, net			14,798		14,776		14,753		14,731		14,708
Other borrowings			-		-		1,887		2,629		4,015
Lease liabilities			2,155		2,260		2,368		2,480		2,591
Accrued interest payable			176		397		190		409		206
Other liabilities			6,932		6,838		5,072		7,100		4,416
	Total Liabilities		819,873		794,501		760,955		725,895		676,850
Stockholders' Equity
Common stock			23		23		23		23		23
Additional paid in capital			28,566		28,552		28,537		28,523		28,523
Retained earnings			32,999		31,019		29,288		28,121		25,954
Accumulated other comprehensive income (loss)			(8,898)		(8,534)		(893)		(779)		54
	Total Stockholders' Equity		52,690		51,060		56,955		55,888		54,554
	Total Liabilities and Stockholders' Equity	$	872,563	$	845,561	$	817,910	$	781,783	$	731,404

 

 

Community  Heritage Financial, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
			Three Months Ended						Six Months Ended
			June 30,		March 31,		June 30		June 30,		June 30,
			2022		2022		2021		2022		2021
Interest Income
	Loans, including fees	$	6,840,541	$	6,362,459	$	6,328,253	$	13,203,000	$	12,834,724
	Securities		704,665		642,529		347,943		1,347,194		651,618
	Fed funds sold and other		17,832		14,506		5,115		32,338		13,825
	Total interest income		7,563,038		7,019,494		6,681,311		14,582,532		13,500,167
Interest Expense
	Deposits		351,887		333,979		442,650		685,866		943,669
	Borrowed funds		16,173		-		-		16,173		947
	Subordinated debt		238,049		238,049		238,049		476,098		476,098
	Other Interest Expense		23,874		32,734		51,071		56,608		122,500
	Total interest expense		629,983		604,762		731,770		1,234,745		1,543,214
Net interest income			6,933,055		6,414,732		5,949,541		13,347,787		11,956,953
Provision for loan losses			217,425		10,133		1,432,697		227,558		2,898,678
Net interest income after provision for loan losses			6,715,630		6,404,599		4,516,844		13,120,229		9,058,275
Non-interest income
	Service charges on deposits		196,519		158,091		181,006		354,610		374,835
	Earnings bank owned life insurance		(16,784)		1,018		45,307		(15,766)		96,997
	Gain sale of fixed assets		16,508		-		-		16,508		1,500
	Gain sale of securities		-		-		-		-		196,091
	Mortgage loan income activity		878,041		781,826		1,313,885		1,659,867		2,774,085
	Other non-interest income		236,352		263,541		200,732		499,893		373,906
	Total non-interest income		1,310,636		1,204,476		1,740,930		2,515,112		3,817,414
Non-interest expense
	Salaries and employee benefits		3,068,690		2,950,494		2,880,755		6,019,184		5,462,934
	Occupancy and equipment		771,166		769,524		706,167		1,540,690		1,383,404
	Legal and professional fees		161,210		180,696		169,242		341,906		319,270
	Advertising		149,740		183,204		131,225		332,944		287,350
	Data processing		600,583		522,601		625,055		1,123,184		1,093,303
	FDIC premiums		142,860		135,583		108,963		278,443		223,759
	Loss sale of securities		-		-		-		-		17,826
	Other intangible amortization		-		695		2,083		695		4,167
	Other		432,251		347,292		377,273		779,543		595,921
	Total non-interest expense		5,326,500		5,090,089		5,000,763		10,416,589		9,387,933
Income before taxes			2,699,766		2,518,986		1,257,011		5,218,752		3,487,756
Income tax expense			629,153		698,285		365,343		1,327,438		986,923
Net Income		$	$2,070,613	$	$1,820,701	$	$891,668	$	$3,891,314	$	$2,500,833
Basic earnings per share		$	0.92	$	0.81	$	0.40	$	1.73	$	1.11
Diluted earnings per share		$	0.92	$	0.81	$	0.40	$	1.73	$	1.11

 

 

Community Heritage Financial, Inc. and Subsidiaries
Selected Financial Data
Income Statement Review
		For the Three Months Ended						Six Months Ended
		June 30,		March 31,		June 30,		June 30,		June 30,
		2022		2022		2021		2022		2021
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Interest Income	$	7,563,038	$	7,019,494	$	6,681,311		14,582,532		13,500,167
Interest Expense		629,983		604,762		731,770		1,234,745		1,543,214
Net interest income		6,933,055		6,414,732		5,949,541		13,347,787		11,956,953
Provision expense		217,425		10,133		1,432,697		227,558		2,898,678
Net interest income after provision	$	6,715,630	$	6,404,599	$	4,516,844		13,120,229		9,058,275
Non-interest income	$	1,310,636	$	1,204,476	$	1,740,930		2,515,112		3,817,414
Non-interest expense		5,326,500		5,090,089		5,000,763		10,416,589		9,387,933
Yield on interest-earning assets		3.64 %		3.57 %		3.85 %		3.59 %		3.96 %
Cost of interest-bearing liabilities		0.51 %		0.51 %		0.69 %		0.51 %		0.73 %
Efficiency ratio		64.61 %		66.83 %		65.00 %		65.66 %		59.49 %
Balance Sheet Review
		June 30,		March 31,				June 30,
		2022		2022				2021
		(Unaudited)		(Unaudited)				(Unaudited)
(dollars in thousands)
Total assets	$	872,563	$	845,561			$	731,404
Loans, net of reserve		685,713		637,385				564,065
Goodwill & intangibles		1,657		1,657				1,662
Deposits		790,812		770,230				650,914
Shareholder's equity		52,690		51,060				54,554
Asset Quality Review
Non-accrual loans	$	997	$	1,023			$	1,440
Non-accrual troubled debt restructured		883		912				216
Non-performing assets		1,880		1,935				1,656
Trouble debt restructured loans still accruing		752		755				969
Other real estate owned		-		-				-
Non-performing assets to total assets		0.22 %		0.23 %				0.23 %
Non-performing assets to total loans		0.27 %		0.30 %				0.29 %
Summary of Operating Results
		For the Three Months Ended				For the Six Months Ended
		June 30,		June 30,		June 30,		June 30,
		2022		2021		2022		2021
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Pre-allowance for Loan Loss provision, pre-tax net income	$	2,917,191	$	2,689,708	$	5,446,310	$	6,386,434
Allowance for loan loss provision, pre-tax		217,425		1,432,697		227,558		2,898,678
Tax expense		629,153		365,343		1,327,438		986,923
Net Income	$	2,070,613	$	891,668	$	3,891,314	$	2,500,833
(dollars in thousands)
Charge-offs	$	7	$	4,583	$	7	$	4,601
(Recoveries)		(34)		(16)		(38)		(29)
Net charge-offs	$	(27)	$	4,567	$	(31)	$	4,573
Per Common Share Data
Common shares outstanding		2,251,320		2,251,320		2,251,320		2,251,320
Weighted average shares outstanding		2,251,320		2,251,320		2,251,320		2,251,320
Basic earnings per share	$	0.92	$	0.40	$	1.73	$	1.11
Diluted earnings per share	$	0.92	$	0.40	$	1.73	$	1.11
Dividend declared	$	0.04	$	0.04	$	0.08	$	0.08
Book value per share	$	23.40	$	24.23	$	23.40	$	24.23
Tangible book value per share	$	22.67	$	23.49	$	22.67	$	23.49
Selected Financial Ratios (unaudited)
Return on average assets		0.97 %		0.49 %		0.94 %		0.71 %
Return on average equity		15.99 %		6.50 %		14.47 %		9.12 %
Allowance for loan losses to total loans		1.03 %		1.01 %		1.03 %		1.01 %
Allowance for loan loss to total loans (excluding PPP loans)		1.03 %		1.06 %		1.03 %		1.06 %
Non-performing assets to total loans		0.27 %		0.29 %		0.27 %		0.29 %
Non-performing assets to total loans (excluding PPP)		0.27 %		0.30 %		0.27 %		0.30 %
Net Charge-offs to total loans		0.00 %		0.79 %		0.00 %		0.79 %
Common equity tier 1 (CET1) capital		10.90 %		N/A		10.90 %		N/A
Tier1 capital		10.90 %		N/A		10.90 %		N/A
Total risk based capital		12.03 %		N/A		12.03 %		N/A
Tier-1 leverage ratio		8.73 %		N/A		8.73 %		N/A
Community bank leverage ratio (bank only)**		N/A		9.06 %		N/A		9.06 %
Average equity to average assets		6.10 %		7.58 %		6.46 %		7.73 %
Tangible Common Equity/Tangible Common Assets		5.86 %		7.25 %		5.86 %		7.25 %
Net interest margin (bank only)		3.45 %		3.59 %		3.40 %		3.68 %
Loans to deposits - (EOP)		87.95 %		87.55 %		87.95 %		87.55 %
**As of September 30, 2021 the bank reverted back to the BASEL III regulatory framework for capital reporting and discontinued the CBLR calculation.
**As of March 31, 2020 the bank adopted the community bank leverage ratio (CBLR) for capital reporting

 

 

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SOURCE Community Heritage Financial, Inc.

FAQ

What were the earnings results for Community Heritage Financial in Q2 2022?

Community Heritage Financial reported net income of $2.07 million for Q2 2022.

How did the total assets of CMHF change as of June 30, 2022?

Total assets increased to $872.6 million as of June 30, 2022.

What is the dividend declared by Community Heritage Financial in July 2022?

A dividend of $0.04 per share was declared for stockholders of record as of July 29, 2022.

How did CMHF's loan balances change in Q2 2022?

Loan balances increased by $48.9 million to $692.8 million as of June 30, 2022.

What was the increase in deposits for Community Heritage Financial in Q2 2022?

Deposits grew by $20.6 million in Q2 2022.